ESOPs operate successfully in a broad range of companies—large and small, public and private. The ideal private company candidate will meet most of the following criteria:
- The company has strong, stable cash flow and a history of increasing sales and profits.
- The ownership group is interested in remaining involved/participating in the business.
- The owner(s) can be patient — they are not seeking immediate cash payment in full.
- The ownership group is concerned about employees and/or the long term future of company. They are motivated by “legacy” or mission goals in addition to cash.
- There is a lack of cash strategic buyers willing to pay significant premium for the company.
To learn more about what makes a good ESOP candidate, view this video.